Buyers now have the upper hand, and sellers are feeling it
As September unfolded in the Greater Toronto Area (GTA), it brought about a notable shift in the housing market dynamics. The renowned Toronto realtor and chartered accountant, Scott Ingram, suggests that the GTA is presently witnessing what can be characterized as a buyer's market. This shift has been attributed to a surge in new listings, which has notably altered the sales-to-new-listing ratio (SNLR) – a key indicator of market strength.
While the Toronto Regional Real Estate Board (TRREB) has not explicitly labeled it a "buyer's market," their Chief Market Analyst, Jason Mercer, has alluded to the fact that "buyers may benefit from more negotiating power" given the surge in new listings in September.
The Numbers Speak Volumes:
The numbers paint a vivid picture of this shift. In September, there were 4,642 recorded sales, accompanied by a remarkable 16,258 new listings. The SNLR stood at 28.6%, marking a significant deviation from recent years.
Diving into specifics, the freehold segment in the City of Toronto saw a dip in the SNLR, down to 30%. In the city's condo market, the SNLR plummeted to 25%, a figure well below the 10-year average of 49%. Notably, this represents the lowest single-month SNLR recorded since the start of 2011.
Sellers are feeling the burn now that buyers have the power back - for the first time in a long time
Factors at Play:
Scott Ingram attributes this shift to multiple factors, particularly the exodus of investors, especially those with variable-rate mortgages. This has resulted in an increase in inventory levels, with active listings standing at 27% above the 10-year average, while sales lag behind, with a 39% shortfall compared to the 10-year average.
The Perception of Change:
Beyond the statistics, it is evident that market participants, both buyers and sellers, have recognized the market's shift. Bidding wars have become less frequent, and relisting activity is on the rise. The increased number of listings has given buyers a broader array of options, and agents are following up with buyers to gauge their interest—a far cry from the frenetic pace of a hot market.
Buyer's Influence:
This shift also signifies a growing power shift towards buyers. With less competition, buyers have more room to insist on clauses and conditions without jeopardizing their offers. Ingram shares examples of clients securing properties with multiple conditions, a testament to the newfound buyer power in the market.
A Shift with Few Precedents:
While buyer's markets are not unheard of, Erica Reddy-Choquette, a Toronto broker, notes that it has been a while since the GTA experienced a market comparable to the current one. Over the last decade, the market has predominantly favored sellers, making this shift a significant change for both buyers and sellers.
Price Trends:
Despite the change in market dynamics, home prices are showing resilience. TRREB reports a 3% year-over-year increase in the average price, reaching $1,119,428 in September. However, some experts, like BMO Economist Robert Kavcic, caution that the current upward price trend may be limited. Kavcic suggests that while a price crash like the one witnessed in the US in 2009 is unlikely, there is room for price adjustments, especially if interest rates remain high. He predicts that prices may stagnate for some time.
The GTA's housing market is undoubtedly evolving, offering new opportunities and challenges for both buyers and sellers. With a buyer's market in the making, it's essential for all stakeholders to adapt to these changing conditions and carefully consider their strategies in the ever-shifting world of real estate. As the market continues to transform, keeping a close eye on the trends and developments will be crucial for those navigating the GTA's real estate landscape.
